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Company A, an American company, owns Company B, a Canadian subsidiary. Company A borrowed 1,000,000 Canadian dollars as a hedge on its net investment in

Company A, an American company, owns Company B, a Canadian subsidiary. Company A borrowed 1,000,000 Canadian dollars as a hedge on its net investment in Company B. For 20X3, Company A recorded an exchange gain of $40,000 due to exchange rate changes. The 20X3 translation adjustment for Company B was a debit of $42,000.

Describe the accounting treatment required for the hedge on Company A's books.

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